With U.S. credit card balances at record levels and defaults rising, more shoppers than ever are tapping buy now, pay later services on key shopping days to stretch their budgets, Reuters reported. While they can be a tool for shoppers, consumer advocates are raising red flags about cash-strapped shoppers who are adding months-long loans with rates that can top out at 36% — the maximum lenders can charge in many states. Demand for debt counseling services is up significantly from last year, defying the seasonal slowdown experienced during the holidays, said Bruce McClary, spokesman for the National Foundation for Credit Counseling. The increased use of buy now, pay later loans from providers like Klarna, Affirm, PayPal and Afterpay "signal an increase of short-term debt on top of the more than $1 trillion in outstanding credit card balances," McClary said. Shoppers can purchase anything from a $3,253 Jil Sander leather tote bag marked 30% off from luxury retailer Farfetch , to groceries from Walmart and Burger King gift cards valued at up to $500 — getting the merchandise before it's fully paid for.
